Mike Grunwald has a post at FP summarizing his new book, The New New Deal. The basic argument (of both the post and the book) seems to me clear and unassailable: the President’s “stimulus package,” or the American Recovery and Reinvestment Act, is an under appreciated success for two reasons.
First, as to recovery, the jobs stimulus averted much worse unemployment than we would otherwise have had; this is widely understood.
Second, as to reinvestment, it will bring real and lasting “change” — Grunwald uses this word deliberately, arguing that (unlike FDR) Obama has scrupulously kept his campaign promises. ARRA has transformed the energy sector, giving renewable energy a new lease on life; it modernized medical records, it put money into high-speed rail, and pushed high-speed internet out to poorer areas. This is the more original part of Grunwald’s book and the most valuable; it’s summarized here in the FP post.
Grunwald has a tremendous amount of energy, writes in a chatty, highly readable style, and the book is full of what certainly seems like terrific reporting. I hope very much lots of citizens, and especially perhaps journalists, will read it and take on board its argument, because it’s an argument that needs to be made.
Now, on to the disagreements.
1. Grunwald does not represent Keynesianism very well. He writes that the law “was textbook Keynesian economics“. But it wasn’t. As Paul Krugman put it, “Keynesian analysis provides numbers as well as qualitative predictions, and given reasonable projections of the economy’s path in January 2009, the proposed stimulus just wasn’t big enough.” There’s more on this at the link, but the basic point is clear: if you were familiar with textbook economics, as Krugman explained, you knew the stimulus bill wasn’t big enough. (Grunwald has a low opinion of Krugman, whom he associates with “the left.”)
Arithmetic aside, there is a political problem. In the book Grunwald cites the (in my view highly reputable) Jared Bernstein as saying, “One thing they never taught us in grad school was how to sell Keynesian stimulus … ‘It Would Have Been Worse Without Us’ is just a fruitless message.”
But that’s not how you sell Keynesian stimulus, that’s how you sell inadequate Keynesian stimulus. Keynesian stimulus, you sell by saying, “The GDP gap will close by x points if we provide y stimulus.” And then (this part is important) you provide y stimulus.
So representing the stimulus as “textbook Keynesian economics” does Keynesian economics a disservice. The stimulus was well shy of what textbook Keynesian economics would recommend.
2. Grunwald does not represent the New Deal very well. If there was one thing the New Deal didn’t need in 1936, it was a book uncovering its “hidden” accomplishments. Grunwald writes, with justifiable pride, “I spent two years researching the stimulus, and I found that it is a new New Deal.” The thing is, by the time the New Deal was as old as the stimulus is, everyone could see, without a second’s research, what it was.
In a sense, the point I made in number 1 – that the stimulus package provided inadequate stimulus under Keynesian economics – makes the Obama program more, rather than less, like the New Deal. The New Deal also provided, on the arithmetic, inadequate fiscal stimulus. But to make up for it, it provided lots more. It did, of course, provide environmental conservation, highways, and power – and with them, jobs. But also it was a spur to unionization. It was a check on Wall Street. It was a new program of monetary policy. It was a backstop for the banks, but also a new regulator for them. It was an aid to the poor, the disabled, the elderly. Perhaps most of all, it was a new way of thinking about government, and what citizens could expect from it.
Roosevelt not only provided recovery and “change,” he brought the American people along with him, winning an unprecedented record landslide in 1936 – an election generally seen as a referendum on whether the American people wanted more of the New Deal or not.
Obama may yet win such an electoral victory, and if he does, I’ll reassess this caveat. But feel pretty safe in suggesting he won’t: Nate Silver is a far better predictor than Literary Digest.
In the book, Grunwald has “Obama aides grumble that it could have used a new Federal Writers Project to churn out better pro-stimulus propaganda.” But whose fault is it that there wasn’t one? Before you say, as Grunwald surely would, that it’s GOP obstructionists’ fault, I think we might consider that to obstruct something it has to exist, or at least be proposed.
Even shy of an FWP, the ARRA logo might have been far more commonplace – the New Deal was very good at that, with first the blue eagle and then the WPA logo. I have seen ARRA logos by the occasional roadwork blockade – not the most inspiring time to see one, and not common enough to make a difference.
Grunwald’s book is clearly setting out to be the Federal Writers Project the administration didn’t create, and good for him, I suppose. But the very existence of the book undermines the comparison to the New Deal.
It’s a good book, and I hope, as I say, lots of people will read it to understand the Obama administration. Just not to understand Keynesianism or the New Deal.